Notice on Implementation of Individual Income Tax Preferential Policies for the Guangdong-Hong Kong-Macau Greater Bay Area

Three months after the Ministry of Finance and the State Administration of Taxation promulgated the Notice on Individual Income Tax Preferential Policies for the Guangdong-Hong Kong-Macau Greater Bay Area (Circular 31) to grant subsidies to overseas high-end talents and critically lacking talents working in the Great Bay Area (GBA), the Department of Finance and the Tax Bureau of the Guangdong Province finally issued a follow-up notice on the implementation of Circular 31.

The Notice on Implementation of Individual Income Tax Preferential Policies for the Guangdong-Hong Kong-Macau Greater Bay Area (GD Notice 2) was issued on 17 June 2019, which sets out the main criteria and principles for implementing the subsidies policy.

1.  

Calculation of the subsidies

Pursuant to GD Notice 2, the subsidy amount for an eligible person provided by the 9 municipal governments in the GBA = the amount of individual income tax (IIT) he/she has already paid in those 9 cities1 - his/her taxable income x 15%. Such subsidy itself is exempt from IIT.

According to the above calculation, through the relevant subsidies, the actual amount of IIT that eligible persons need to bear will be reduced to 15% of their taxable income.

2.

Scope of taxable income

The taxable income mentioned in GD Notice 2 covers not only comprehensive income (i.e., the income from wage and salaries, remuneration for labour services, author’s remuneration and royalties) but also business income and subsidised income derived from selected talent projects or programmes. These provisions indicate the governmental authorities not only encourage the talents to work but also support them to start out their own businesses in the GBA. The subsidies shall be calculated based on different categories of taxable income separately and subsidised collectively, and the subsidies are provided once a year. 

3.

Eligibility criteria for subsidised talents

GD Notice 2 only sets out the basic criteria of overseas “high-end talents” and “critically lacking talents”. The specific identification standards and operative measures are left to each of the 9 municipal governments to formulate according to their respective local conditions which shall be submitted to the relevant provincial departments for record by the end of July before implementation.

Subsidised talents should have the following basic criteria:

(a)

He/she is a permanent resident of Hong Kong or Macau, or becomes a Hong Kong resident through the admission schemes for talent, professionals and entrepreneurs; or he/she is a Taiwanese resident, a foreigner, or a returned student or overseas Chinese with long term residency abroad.

(b)

He/she works in any of the 9 cities within the GBA and pays PRC taxes as required by law.

(c) 

He/she complies with the applicable laws and regulations, research ethics and science and research integrity.

He/she shall also satisfy either of the following conditions:

(i)

He/she has been selected for a major talent project of the State, province or municipality, or has obtained a High-level Talent's Card of Guangdong Province or a Foreigner’s Work Permit (Category A) or a confirmation of a foreign high-end talent, as well as other overseas high-level talent recognised by the State, provincial or municipal authorities; or

(ii)

He/she is a science and research team member of a major innovation platform of the State, provincial or municipal level, or a science and technology research team member in a higher education institution, science and research institution, hospital and other relevant institution, or a technical skills backbone and an excellent managerial personnel working or starting out his/her own business in a key industry or a key field within the Guangdong Province, or any other critically lacking talent with special expertise recognised by the 9 municipal authorities within the GBA.

4.

Miscellaneous

The relevant authorities involved are specifically appointed in GD Notice 2, which may make it easier for the eligible talents to deal with the formalities of application for the subsidies. If a talent obtains the subsidies from two or more places, such subsidies shall be reasonably shared by the relevant local governments.

GD Notice 2 sets out the framework of the subsidy mechanism, though further details of the provision of the subsidies have yet to be further determined by the 9 municipal governments. GD Notice 2 will be on trial for a year and may possibly be adjusted after that. The parties concerned shall keep a close watch on the follow-up policies and, if feasible, consider relocating the eligible talents to work in the 9 cities for them to enjoy the preferential tax policies and apply for the subsidies for the eligible talents in time after the practical measures are introduced.

1The 9 cities are Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing.